[Music] um Noah's question is up next. It says, Can you explain tax-deferred growth retirement account? Investments grow tax-deferred. Is that different than after-tax investment accounts? What kinds of investments do not grow tax-deferred? So, there's a lot there. I think he just needs to get a baseline of, Hey, what do we mean when we say this term? Yeah, there are three different ways that money can grow. It can grow tax-free, it can grow tax-deferred, or it can grow taxed. I'll start with taxed first because that's kind of the easiest one. If you think about this, if you have a savings account out there and you just have your money parked in a high-yield savings account, and every month there is an interest payment that accrues, and it pays out to you on a monthly basis, at the end of the year, you're going to get a tax form from the bank saying, Hey, you earned this much interest this year. Well, when you get that tax form, you didn't have to pay taxes on that interest. That

you earn your savings accounts well. Investments are no different. If you have an investment account that's in an after-tax account and it pays out capital gain distributions or it pays out dividend distributions or if you transact and you generate capital gains, you have to pay tax on that in the year that it happens. So naturally, if you have a rate of return that you're achieving in that account, there's going to be some reduction to that rate of return because of the drag that taxes create on the portfolio. That's the ACT tax. Well then, we get into the sexy stuff. We get into the exciting stuff, which what most retirement accounts fall into are the tax-deferred and the tax-free bucket. Yeah, and this was, by the way, one thing on that after-tax part that I would just add because it's the CPA man. I can't help it. Is that when you get paid dividends and when you have long-term capital gains, meaning you held the investment for over 12 months, the government does give you favorable lower

income tax rates on those two things. So, it's actually, even though paying income taxes every year, you are paying at a lower rate. So, it's worth notating that the next bucket is tax-deferred, and this is typically where does this happen for you is when you're employer. Now, look, they T changed some legislation recently where that you can now get your employer contributions tax-free as well, but there's going to be some things they have to put on your W2, so it's taxable to you. But in theory, just to keep it simple, your employer is going to take a deduction for any contribution they put in your retirement plan for you. You're going to get it contributed into your retirement plan with the understanding that that money is going to grow tax-deferred, but when you pull it out at retirement, and if you don't pull it out at retirement, they're going to force you to pull it out when you're age 75 with required minimum distributions. It's going to be taxed at ordinary income tax rates. We're like

okay, well, no big deal. That's the same as my wages, but the problem with that is that your ordinary tax rates are typically your highest tax rates. So, that's why you need to understand what's going in after tax, what's going in tax-deferred, and then there's one more bucket, that's the tax-free bucket. Now, this is the one everybody gets excited about because this is your Roth accounts, your Roth IRA, your Roth 401k, your Roth 403b. These things grow completely tax-free, meaning this is why I get so excited for my 20-somethings, my 30-somethings, is 'cause you really do have the opportunity to be a seven-figure millionaire if you can just start the automatic for the people automation of your wealth-building process, and that's what you know. So, if I'm putting a priority of which ones I like, and nobody likes to rate their children, but if you're putting me to the task and you're saying, Brian,

what's your favorite? Well, I absolutely love Roth money. I mean, it is so valuable. I put it in, and then I guard it, and then it's usually one of the last assets I kind of want to pull it out because I even think it has some legacy and beneficiary benefits. After that, I like my after-tax accounts because that's going to be easy to get to, still has some tax-favored growth structures to it. And then my third bucket is, of course, tax-deferred. But that doesn't mean we're throwing it away, is because typically that is money that was free from your employer and/or either you're in such a high tax bracket because that's the other thing I can say is that if you're in such a high tax bracket that you say, I'd rather take the tax deduction now with my contribution, lower my current ordinary income tax rates with the understanding that when I retire and not having all that earned income, my tax rate might be lower. That ordinary income tax rate could be

lower then yeah let's let's let's go ahead and load up that tax-deferred early because you're in the good situation of making a high income.

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